Property Insurance Outlook: Dull But Stable

Last Updated Sep 24, 2009 5:08 PM EDT

No one really finds insurance interesting, not even insurers. In fact, insurers like it to be dull: no hurricanes, floods, earthquakes, wildfires, tornados. Instead of stories on the morning news, insurers prefer to quietly collect their premiums and drop them in the bank. Thus, two reports from the property casualty front should make these insurers, and their investors, very happy.

Barring a major catastrophe or unforeseen event, risk managers should see stable property casualty rates at least through the beginning of 2010, said executives from insurance broker Marsh & McLennan on Wednesday.
With the likelihood of hurricanes diminishing by the day, that prospect is a fairly safe bet. Using the "D" word, Marsh's chief economist said, "It's a classic dull market. Supply and demand are in balance."

An annual survey conducted by the audit, tax and advisory firm of KPMG showed essentially the same thing. Nearly half of the insurance executives thought their company would perform ahead of expectations in the year ahead, up from 22 percent last year. But their outlook for underwriting profits in the next one to three years "remains restrained."

For the most part this mirrors what the market is saying. Property insurers' shares, with the exception of American International Group, didn't go down as much as most financial stocks during the depths of the recession. But they haven't risen as much either, again AIG excepted, as the market rebounded.

So what happens now? If you believe the good news coming out of Washington about the recession being over, then you might want to choose another place for your money.

But when you see the housing rebound curtailing, unemployment still rising, and car sales plummeting after the "Cash for Clunkers" program depleted available buyers, you might want to think about good ole' Allstate and Travelers as investment prospects.

After all, insurers can also be characterized by another "D" word: Defensive.

  • Ed Leefeldt

    Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.